Metro Company to Raise Additional Funds for Third Phase of Construction

Shenzhen Metro Co., the builder and operator of the subways in Shenzhen, said that they were able to raise ten billion yuan by selling medium term notes. The capital can now be used to finance the third phase of construction in the city.

The Industrial and Commercial Bank of China and Hua Xia Bank were the lead underwriters of five year notes that have a fixed yield rate of 5.24 percent. The company is also planning to go public where it will raise additional capital to further fund projects. Previous projects of the company were financed by either the city government, bank loans or district governments.

In the first phase of Shenzhen Metro construction 70 percent of the total investment was shouldered by the city government and the remaining 30 percent was divided between three banks, namely China Development Bank, Bank of China and Industrial and Commercial Bank of China. On the second phase of construction the city government offered to finance 20 percent of the costs while Bao’an and Longgang districts offered to finance 10 percent each in the project.

To complete the third phase of the city’s Metro, the company needs additional capital of 100 billion yuan by 2020, though the government can no longer offer to support such a large investment. The company turned to using the capital market and enlarging financing channels, such as medium term notes, medium term bonds, short term loans and bank loans to raise more capital for the project.